Tip pooling and tip management have various variables to take into consideration when engaging in the service industry for various businesses. While tip pooling is particularly popular in the restaurant business, it’s also a useful tool in hotels and the hospitality industry. Using tip pooling software enables better employee retention in these industries, which involve a lot of serving and accommodations being made for guests. The right kind of tip sharing software or tip distribution software also better defines your business hierarchy.
This guide gives you a better understanding of how tip management works and can be improved within these industries, helping employees feel more valued while also putting you in a stronger position when it comes to meeting your financial objectives.
Tip Management In Restaurants
Determining how to fairly distribute tips in the restaurant industry is a fine line to toe, as some harder working staff may feel hard-done-by when they get paid. For example, a server may work on one huge table, getting a higher tip than servers who are very attentive and serve every table with charm, armed with great attention to detail. Additionally, you have to differentiate the employees you’re looking to pay. In the restaurant industry, there are front-of-house employees such as servers, bartenders, greeters, food runners, and bussers. The back-of-house employees, employees who normally don’t receive tips, include cooks, chefs, dishwashers, and barbacks.
With tip pooling, you can be a little more selective and reward employees accordingly. For example, you might pay your host/hostess and non-kitchen staff well—as a result, you can tip them a smaller percentage of overall tips than employees who may substantiate much more of their wages through tips. You can use devices for this process when outlining how to fairly distribute tips, such as a tip jar where everything earned during a shift is collected. Many restaurant managers choose to do tip allocation through tip splitting by the hour, putting all cash and credit tips into one place, adding them up before dividing the hours worked by the tip pooling sum. The risk is that high earners may get left with nothing at the end of the night, meaning no restaurant tip is automatic. But, it’s a method that ensures each server is tipped how many hours were worked multiplied by the hourly wage.
The alternative to this is tip sharing, where tipped employees re-distribute tip money, giving out percentages to the non-tipped employees such as the aforementioned cooks and dishwashers.
How Tip Pooling Can Work in Hotels
While this form of tip allocation doesn’t occur nearly as frequently in the hospitality industry as it does in restaurants and bars, tip pooling and tip sharing are resourceful tools to use to ensure your hotel employees are properly compensated. Like a restaurant, the hotel industry has two types of employees you need to consider when using tip management software. There are front-of-house employees such as guest services attendants, concierges, room cleaning crews, and bell personnel. Then, there are back-of-house employees, like janitors and laundry crews.
In this case, automatic tip sharing may be more advisable than any other method of tip management. If you’re a hotel manager, you could pay a percentage of your tips to the janitors and laundry crews, especially if you feel as if they’ve been doing more work around the hotel than usual. With this method, the people you’re giving the benefit of tip sharing to will appreciate it while other workers may take offense to it. It’s a fine balance, but one that makes everyone working in the hospitality industry feel more appreciated, potentially building team morale.
What If You Use Tip Crediting as a Method of Tip Allocation?
One method that restaurants and hotels use to save the potential headaches from determining how to fairly distribute tips is tip crediting. This allows employers to take tip credits out of employee wages, allowing only employees who were tipped at least $30 for the month to participate. It also allows for tipped employees such as bartenders at restaurants or concierges to exempt themselves from pooling with non-tipped employees. When doing your tip allocation for your business, having a template in place when figuring out how to calculate tips helps so long as it follows federal and state guidelines.
As you decide how to figure out tip distribution, these tips should help to make your tipping structure simpler while ensuring everyone gets a piece of the pie, so to speak. Contact TipHaus now to establish the best tip management strategy for your business.